MPC Mandate

The legal backing for monetary policy by the Bank derives from the various statutes of the bank such as the CBN Act of 1958 as amended in CBN Decree No. 24 of 1991, CBN Decree Amendments 1993,No. 3 of 1997,No. 4 of 1997,No. 37 of 1998,No. 38 of 1998,1999 and CBN Act of 2007.
Section 12 Sub-sections (1) to (5), CBN Act of 2007 (Ammended)
In order to facilitate the attainment of price stability and to support the economic policy of the Federal Government, there shall be a Committee of
the Bank known as the Monetary Policy Committee (in this Act referred to as "the MPC")

Issue System

Naira notes and coins are printed/minted by the Nigerian Security Printing and Minting Plc (NSPM) Plc and other overseas printing/minting companies and issued by the Central Bank of Nigeria (CBN). At the currency printing works of the NSPM Plc, quality is meticulously controlled throughout every process of currency production. This guarantees that every note issued meets the required standard. The CBN maintains an office called Mint Inspectorate in the premises of the NSPM Plc to maintain security and quality of Naira notes and coins.

Currency is issued to deposit money banks through the branches of the CBN, and old notes retrieved through the same channel. Currency deposited in the CBN by the banks are processed and sorted to fit and unfit notes in line with the clean note policy. The clean notes are re-issued while the dirty notes are destroyed.

Development Financing

Development financing is one of the requirements for sustainable economic growth in any economy. The supply of finance to various sectors of the economy will promote the growth of the economy in a holistic manner and this, will make development, welfare improvement to proceed at a faster rate.

The Central Bank of Nigeria development finance initiatives involve the formulation and implementation of various policies, innovation of appropriate products and creation of enabling environment for financial institutions to deliver services in an effective, efficient and sustainable manner. The initiatives are mainly targeted at agricultural sector, rural development and micro, small and medium enterprises.

Financial Inclusion

Financial inclusion has continued to assume increasing recognition across the globe among policy makers, researchers and development oriented agencies. Its importance derives from the promise it holds as a tool for economic development, particularly in the areas of poverty reduction, employment generation, wealth creation and improving welfare and general standard of living.

A survey conducted in Nigeria in 2008 by a development finance organization, the Enhancing Financial Innovation and Access revealed that about 53.0% of adults were excluded from financial services. The global pursuit of financial inclusion as a vehicle for economic development had a positive effect in Nigeria as the exclusion rate reduced from 53.0 % in 2008 to 46.3 % in 2010.

Payments System

The payments system plays a very crucial role in any economy, being the channel through which financial resources flow from one segment of the economy to the other. It, therefore, represents the major foundation of the modern market economy. Essentially, there are three pivotal roles for the payments system, namely: the Monetary Policy role, the financial stability role and the overall economic role.

The Nigerian Payments System witnessed remarkable achievements in the recent past, with the introduction of a number of initiatives under the Payments System Vision 2020

FSRCC

The CBN in April 1994 undertook to facilitate a formal framework for the co-ordination of regulatory and supervisory activities in the Nigerian financial sector by establishing the Financial Services Coordinating Committee (FSCC) to address more effectively, through consultations and regular inter-agency meetings, issues of common concern to regulatory and supervisory bodies.

On 27th May, 1994, the name of the Committee was changed to Financial Services Regulation Coordinating Committee (FSRCC). The Committee was accorded legal status by the 1998 amendment to Section 38 of the CBN Act 1991 and formally inaugurated by the Governor of the CBN in May 1999. http://www.fsrcc.gov.ng/

Payment Systems

Large Value Payments (Inter-Bank Fund Transfer System)

In line with global trends in managing inherent payment and settlement risks in large value payments, the CBN commenced the operations of the Real Time Gross Settlement System in December 2006. The CBN RTGS (Central Bank of Nigeria Inter-bank Fund Transfer - CIFT) System interfaces with the core banking application (T24 System) and had all the Deposit Money Bank and Discount Houses as direct participants.

A new RTGS System was deployed on December 18, 2013 along with Central Securities Depository (CSD). The purpose of the replacement of the old RTGS System is to have a robust system that will meet all the users' requirements and addresses all the challenges with the old system.

Features of the new RTGS System

The new RTGS interfaces with Scripless Securities Settlement System (S4) to ensure delivery versus payment. In other words, before securities are moved from settler’s portfolio to the buyer’s portfolio, S4 will send a message to RTGS System to confirm that the buyer has sufficient funds in its account before movement of funds from the buyer’s account to the seller’s account can take place. Upon confirmation, RTGS sends message to S4 to effect the securities movement from sellers portfolio to buyers portfolio.

The new RTGS facilitates straight-through-processing (STP) between RTGS and core banking application. All banks including CBN were advised to have STP to ensure that the beneficiaries of 3rd party transfers get value in their account immediately.

SWIFT Messaging format was adopted and the system rides on SWIFT communication network. The under-listed messaging types are used for transactions while other messages such as MT910, MT900, etc are just for settlement confirmation or error message.

MT103 (as 3rd Party Customer transfer)

MT202 (as InterBank transfer)

MT102 (as multiple credit payment)

MT202 (as Cash Withdrawal)

MT971 (as Net Clearing settlement)

MT202 (as Standing Deposit Facility)

Linkage with approved external systems such as NIBSS:
NIBSS transmit net settlement position of banks from clearing to RTGS for settlement at a designated time. Zero session is 9am for settlement of CSCS file, 1st session is at 10am for settlement of cheque and NEFT, 2nd session at 2pm for settlement of return cheque and NEFT, 3rd session at 3pm for inter-bank settlement of cards and other electronic payments.

Payment processing:
Payment messages are settled if and only if the sending bank has sufficient funds/available balance in its account for the payment amount to be transferred to the receiving bank. If sender does not have sufficient available balance for a payment, the payment will be ‘queued’

Queuing Management:
Queued payment will be released for settlement based on priority + First-In-First-Out (FIFO) within the daily operational hours when funds are available. This means payment with same priority will be based on FIFO only but payment with higher priority will be treated before those with lower priority.

Priority Setting:
Banks shall attach priority code to a payment instruction. However, if the bank does not specify a priority code for a payment order, the system would automatically assign the lowest priority code, which is the default code. CBN initiated payment and clearing transactions have higher priority than bank-initiated payments.

Reordering:
Banks could re-order their payment orders on queue by changing their priority.

Cancellation:Outstanding payment instructions on the queue shall be cancelled automatically by the system at the stipulated cut-off time for unsettled payments cancellation. Banks could cancel their payment instructions on the queue any time before the end of the stipulated cut-off time for unsettled payments cancellation.

Gridlock Resolution: In case of gridlock of payment instructions on the queue, the System shall apply an algorithm to select those payments that can be settled. This action will bring about a bypass of the FIFO method. Gridlock resolution could occur anytime during the hours of operations.

Intraday Liquidity Facility (ILF): In order to enable smooth operation of the system, banks could apply CBN to provide ILF to enable them make payments. The facility is free, provided it is repaid within the day, otherwise, it is converted to overnight repo at punitive interest rate.

Where a participant’s account cannot meet its net settlement position because of it being unfunded, the system shall automatically initiate an ILF which shall be charged to the participant’s clearing collateral. Where the participant defaults at the close of business, the ILF shall be converted to overnight repo at a Penal Rate of MPR+7.

Whenever net settlement is being processed, other transaction types initiated by banks do not settle until the net settlement is completed.

Future Value Payments: Banks can initiate payment with future value date of not later than T+2.

Transactions in equities are conducted through the Nigerian Stock Exchange (NSE). Beginning from April 1997, the clearing and settlement activities at the Nigerian Capital Market improved drastically with the coming on stream of the Central Securities Clearing System (CSCS), a subsidiary of the NSE. This resulted in the ability of the exchange to operate a Delivery-Vs- Payment trading regime on a rolling T+3 transaction cycle. The settlement is achieved through NIBSS which facilitates the inter-bank settlement between CSCS designated settlement banks at which the stockbroking firms maintained trading account.

To reduce trade cancellation and eliminate "failed trades", a trade guarantee fund exists and managed independent of the Exchange/CSCS. As such, recourse is made to the fund whenever a stockbroking firm fails to fund its account for trade settlement not later than day T+3 (settlement day).